India unlikely to resume normal trade with Pakistan anytime soon | The Financial Express

India unlikely to resume normal trade with Pakistan anytime soon

On Monday, Pakistan’s finance minister Miftah Ismail said that the government could “consider importing vegetables and other edible items from India” to help people after floods ravaged crops across that country.

India unlikely to resume normal trade with Pakistan anytime soon
Instead, New Delhi may choose to extend humanitarian assistance to Islamabad, the source said.

While flood-hit Pakistan flip-flops on its plan to source more essential products from India, New Delhi is unlikely to scrap a 200% duty on its imports from Islamabad anytime soon, as it continues to believe that normal trade relation and terrorism can’t go hand in hand, an official source told FE.

Instead, New Delhi may choose to extend humanitarian assistance to Islamabad, the source said. However, no decision has yet been made on lifting or slashing the import tariff and resuming normal trade with Pakistan, he added.

On Monday, Pakistan’s finance minister Miftah Ismail said that the government could “consider importing vegetables and other edible items from India” to help people after floods ravaged crops across that country. However, on Tuesday, its foreign minister Bilawal Bhutto Zardari said Islamabad hasn’t decided on any such thing and that his country is now focussed on rescue and relief operations. Of course, Pakistan’s imports of these edible products from India remained negligible in the June quarter. So even if they are scaled up in near future, these supplies are unlikely to boost India’s export volume much.

India imposed the punitive import duty after stripping Pakistan of the so-called most-favoured nation trade status in the wake of the February 2019 Pulwama terrorist attack, which was traced to Islamabad. Subsequently, in August 2019, Pakistan decided to suspend trade in response to India’s move to revoke the special status of Jammu & Kashmir.

However, following the outbreak of the pandemic, Pakistan was forced to soften its stance and source some pharmaceutical and chemical products from India.

Although India’s exports to Pakistan jumped 73% in the June quarter from a year before to $205 million, it came on the back of a very low base. Moreover, about 85% of these despatches comprised just three product categories —sugar & confectionery, chemicals and pharmaceuticals. In fact, India’s exports to the neighbour stood at just $514 million in FY22, about a quarter of what it shipped out in FY19 (before the bilateral conflict flared up).

Also read Pakistan court suspends Pemra’s ban on live telecast of Imran Khan’s speeches

Meanwhile, India’s imports from Pakistan have virtually stopped in recent years due to the prohibitive duty. However, given the low level of India’s goods purchase from Pakistan (just 0.6% of its imports), the neighbour’s suspension of trade in 2019 didn’t bother New Delhi. However, the impact on Pakistan was perceived to be greater, as the neighbour’s purchases from India stood at over 3% in FY18.

Prime Minister Narendra Modi on Monday said he was “saddened” to see the devastation caused by floods in Pakistan and “hoped for an early restoration of normalcy”.

India had granted the MFN status, a jargon for giving equal treatment to all trade partners under the WTO framework, to Pakistan unilaterally in 1996.

Despite limited bilateral trade, India’s withdrawal of the MFN status in February 2019, symbolically, was seen as the strongest retaliation in trade yet, given that the status was not revoked even after the Kargil war and the 26/11 Mumbai attacks.

For its part, Pakistan didn’t grant the MFN status to India and continued to trade with New Delhi with a negative list of 1,209 products before February 2019. This means barring those products on the list, India can ship out other items to the neighbour. In 2012, Pakistan had committed to granting India the MFN status but retracted later due to domestic opposition.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.